Jeffrey Gundlach Predicts The Coming Tumult

In 2028, we could be voting to choose whether we have a country at all.

Jeffrey Gundlach

One of the reasons I often cite financial analysts like Lyn Alden, Ray Dalio, Erik Townsend, and Peter Zeihan is because they put numbers behind the headlines. They speak about historical and social trends credibly because they demonstrate that what most of us consider mere “politics” has, in fact, hard, tangible real-life impact. They can be difficult to follow at times, but if you listen to them for long enough, what they say begins to make sense, especially if you’re knowledgeable about current events.

Financial analyst Jeffrey Gundlach, founder of the investment firm DoubleLine Capital, recently released a video discussing what America’s financial future looks like for the rest of the 2020s, along with the accompanying broader consequences as a result.

The video is worth watching in its entirety:

If you didn’t watch the video, I recommend you do when you have time, because he raises many interesting points of discussion. A lot of it comports with what I’ve been talking about here on this blog, which is always nice to see, especially coming from someone who analyzes data for a living.

In this post, I want to break down Gundlach’s points, each of which could serve as discussions of their own. For now, we’ll settle for broad summaries.

Debt Will Become The Issue Of 2028

Gundlach begins by making a mathematical case for why America’s debt problem will become a glaring problem by the 2028 election. He lays the blame mostly at over a decade of zero percent interest rates and the refinancing taking place currently at higher interest rates. It’s resulted in a situation where the United States has $212 trillion in unfunded liabilities versus $190 trillion in assets. Furthermore, he notes that current projections show the U.S. running out of money for it’s two big social programs (a topic I tackled in recent commentary) between 2030 and 2032 are actually optimistic scenarios. Just as the most pessimistic scenarios rarely pan out, neither do the optimistic scenarios. Gundlach instead believes the debt issue will turn into a crisis in the 2027-to-2028 time-frame, even as it remains off the table this year.

Before going further, let’s return to Ray Dalio, another big-time investor, and consider his empire lifecycle. Where’s the U.S. on this timeline?

Going by this model, considering the debt bubble hasn’t burst yet, the U.S. is still at its peak. Of course, you can’t tell with everything going on, but there’s perception and reality. The reality is, until the debt busts, none of the really bad stuff is going to happen. The ability of a country to spend money like there’s no tomorrow is the definition of power; until the collectors come knocking, there’s no stopping the U.S.

The problem is, that day is steadily, if not rapidly, approaching. I’ve explained that I think the U.S. is on the verge of superpower collapse within the next two years or so (read my prior posts if you need to familiarize yourself); once that occurs, the debt situation will more quickly come to the fore. How that’s going to happen is something I’m not certain of and I don’t think Gundlach is either. Again, he’s making a mathematical argument, while I see the debt bust as the logical consequence of a country losing supremacy. Either way, it’s going to happen and we share the view that it’s going to happen sooner than we’d like for it to.

But the biggest take-away is that the 2028 election might be the real “most important election ever.” I’m sure we’re all sick of hearing that phrase and there’s no question it’s proven hyperbolic most of the time. There really are some elections which are more important than others, however, due to the unique circumstances within which they took place. 1860 and 1940 are examples of elections that were more important than most.

It was inevitable that the 2028 elections were going to be one of the most significant of our lifetimes. By then, the Baby Boomers will have largely exited the workforce, something demographics have projected for years. According to my timeline and I also think Gundlach’s, it’ll also be the first post-superpower election. By then or around that time, the “quasi-war” will have occurred and could very well be a major election elephant in the room alongside debt. If the 2024 election seems existential now, just wait four years.

In 2024, we’re deciding whether we want to continue on our current path under Joe Biden’s left-wing leadership or go back to what we had under Donald Trump’s nominally right-wing leadership. In 2028, we could be voting to choose whether we have a country at all.

Recession Will Occur Between Now And 2028

This seems like an observation so obvious as to be meaningless, but remember that we’re nearly 15 years removed from the last “natural” recession. The COVID-19 recession was induced in an attempt to reduce deaths due to the disease, an act which likely “reset” the timer to the next recession. In the first few months of 2024, both the inflation and unemployment rates have both increased, indicating whatever the success of “Bidenomics,” we’ve likely reached the end of its road. The likelihood of recession in the next 18 to 24 months is high.

Gundlach believes the U.S. has also run out of rope for dealing with the next recession, the only recourse being to print even more money, certain to drive up inflation and weaken the U.S. dollar. Worse, interest rates have been set as high as possible without making it impossible to borrow money and they’ve since come down, an indication to Gundlach that a recession may be closer than we imagine. However, if we suffer an inflationary recession (a thought echoed by

Robert Stark

), interest rates will need to go up again in an attempt to control inflation, but this will obviously stunt recovery. This is obviously a terrible spot to be in and though Gundlach doesn’t elaborate, the only way out of this is through some sort of systemic “reset.”

Typically, when you hear the term “reset,” it’s not a good thing. There are going to be lots and lots of losers and not many winners. The few winners there are will be the usual suspects and will likely leverage the crisis to expand their control over us.

The Fourth Turning Is Here

For anyone not familiar with the concept, the “Fourth Turning” is a component of the Strauss–Howe generational theory, brainchild of scholars William Strauss and Neil Howe. The theory posits that every society undergoes a transition around every 20 years, culminating in the fourth, a crisis, which ushers in a new order, ending the world as we’ve come to know it. These four “turnings” create a longer-term cycle where a major crisis occurs every 80 to 100 years, meaning our society enters a new era in accordance with this frequency.

I’ve made reference to the Fourth Turning before and even if I haven’t, the model still fits in nicely with everything I’ve been talking about. Gundlach believes, as I do, that we’re well into the Fourth Turning, if only because the 2020s were exactly the time Strauss and Howe predicted over a quarter-centry ago the U.S. would enter its crisis stage.

From their 1997 book:

Sometime before the year 2025, America will pass through a great gate in history, commensurate with the American Revolution, Civil War, and twin emergencies of the Great Depression and World War II […] Every Fourth Turning has registered an upward ratchet in the technology of destruction, and in mankind’s willingness to use it […] This time, America will enter a Fourth Turning with the means to inflict unimaginable horrors and, perhaps, will confront adversaries who possess the same.

It sounds ominous, because it is. There’s a lot more to Strauss and Howe’s theory and I could devote multiple essays to just the Fourth Turning alone. That said, I think my entire time on Substack has been more or less about it, even if I haven’t always mentioned it by name. America’s next Fourth Turning - which, again, is unfolding as we speak - will be defined by two major events: the collapse of the American superpower and civil conflict. Both events will further destabilize the country and unravel the prevailing political order. After maybe 15 to 20 years of further unraveling and conflict, the crisis will finally conclude sometime between 2040 and 2050, and the Strauss-Howe cycle will start all over again. But we’re getting ahead of ourselves.

For now, it suffices to say we’re about to see an intensification of this crisis phase. From a macro perspective, Gundlach says a re-shaping of our institutions, possibly even a eliminating some of them, will occur during this time. The debt will need to be restructured, as explained previously, and though Gundlach doesn’t say so explicitly, the implication is that this will be an extremely arduous time in America. But unless we do it, the U.S. will simply fall apart. He thinks we can do it. So do I, just make no mistake: it’ll be a rough road.

The 2024 Election Will Be Decided By Congress

This is a thought that’s been on my mind for some time, though I’ve never shared it in these spaces. Many of us seem to believe that the 2024 election will end in chaos, based largely on how 2020 ended. My gut feeling is that the 2024 election will indeed have a crazy finish, though it’s still not clear what form that chaos will take.

Gundlach doesn’t go into much detail, but let’s at least take a look at one plausible scenario for how the presidential election could end up being decided by Congress instead of by the Electoral College. It assumes that Independent candidate Robert F. Kennedy Jr. parlays his favorability ratings into serious contention against incumbent Joe Biden and top challenger and former president Donald Trump, resulting in none of the three candidates winning the necessary 270 electoral votes to win.

From The Hill:

For the moment, let’s assume Biden, Trump and Kennedy are “the three presidential candidates who received the most electoral votes.” Suddenly, the magic number is reduced from 270 electoral votes down to 26 state votes. More than that, a state is no longer duty-bound to vote for the candidate who won that state in the general election.

Right off the bat, we have our first friction point. Most Americans may not be aware that a state doesn’t need to pick the candidate who won that state, let alone that Congress decides the presidency in the event no candidate wins the decisive number of electoral votes. It could end up becoming a heated learning experience, as millions of Americans protest what they consider to be an undemocratic procedure, even though it’s been part of the Constitution for generations and even decided a few elections, albeit 200 years ago.

Continued:

For the sake of argument, let’s say that in the final stretch of the campaign, RFK Jr. starts gaining in popularity with more independents, minority voters and Republicans and Democrats dissatisfied with — or disgusted by — Biden and Trump. Because of that, let’s further assume that he wins a respectable number of Electoral College votes.

And:

No one gets to 270 and the House of Representatives, voting on behalf of the 50 states, is entrusted to pick the next president. What could possibly go wrong with that constitutionally mandated solution?

The outcome of such a scenario depends on the the make-up of Congress - a Democratic House majority would likely pick the Democratic challenger and vice-versa. The Senate would be tasked with electing the vice president. Depending on the make-up of either chamber, we could end up with a president and vice president from different parties. Can you imagine a Trump-Kamala Harris presidency?

It’s crazy to imagine, but it’s on the table now. Far from being a unifying moment for the country, it’ll likely accelerate America’s crisis, and politics will become more dysfunctional and existential as a result. Call it a fever dream, but I’ve been wondering lately if something like the 1991 Soviet coup attempt could occur in 2025 as a consequence of electoral chaos.

I know, it all seems ridiculous and I stay away from rampant speculation on this blog. But things are becoming far too unpredictable to rule out anything at this point.

Gundlach gets into other areas, including cryptocurrency, and renders what sounds a lot like an endorsement for Independent presidential candidate Robert F. Kennedy Jr. Check out the rest of the interview when you have time.

Coming To Terms With Our Fall From Grace

Related to the topic, the other day, Rod Dreher asked: what will be the breaking point? He gave his take:

I think I mentioned here the other day that lately I’ve been engaging in a grim game with friends. Most people in my circles have the view that the wheels are coming off everything in the West. I’ve asked American pals what they think will be the breaking point, when the American people say, collectively, “The hell with it,” and revolt in some way. My own guess is that it will take a big military defeat, like losing Taiwan to China; Tsarist Russia’s shocking defeat in the 1903 Russo-Japanese War occasioned a gutting loss of faith in the system by the Russian people.

I don’t think Rod’s entirely wrong. I think a strategic defeat of some sort is definitely going to play a big role in triggering the collapse of the U.S. superpower. However, I expect this to be a political, rather than military defeat. My own personal scenario is that Middle East tensions eventually lead to a confrontation with Iran, possibly over its nuclear program. Washington attempts to assemble a coalition to face off against Tehran. However, due to its declining influence, along with the internal situation of its so-called allies, nobody shows up to fight alongside the U.S. and, possibly, Israel. With nobody to share the burden with, America has no choice but to bow out. Then there’s the matter of the military’s readiness to fight wars being called into question, along with indications even the military doesn’t believe in itself any longer.

That said, what’s likely going to drive the country over the edge is an economic collapse. Rod quotes someone he spoke to who expressed that view. The fact is, the impact of a strategic defeat will make for hot headlines at home, but it’s an economic crisis whose consequences are really going to be felt by us all. History shows that it’s not until the economic ramifications of collapse set in that the games begin.

Rod continues:

If you read my book Live Not By Lies, you will recall that the United States is already fulfilling most of the signs Hannah Arendt identified as evidence that a society is readying itself for totalitarianism. We have mass atomization and alienation. We have a widespread loss of faith in institutions. We have a growing indifference to truth (as distinct from the willingness to believe what makes sense within a preferred narrative). We have an elite class committed to tearing down the pillars of civilization for the sake of including the excluded. All of these factors were present in pre-Nazi Germany, and pre-Bolshevik Russia, Arendt warned.

In Russia, the breaking point was the nation’s defeat in World War I, though of course the groundwork had been laid at least since the government’s failure to respond effectively to the 1891-92 famine. In Germany, Hitler arose out of mass anger and fear over Germany’s loss in World War I, plus the hyperinflation that destroyed the livelihoods and savings of tens of millions of Germans.

History is not fated. It might not happen to us. But we all need to read the signs of the times, and prepare ourselves.

When the curtain does fall on the U.S. as history has known it these last 70 to 80 years, we’ll need to brace ourselves for the shocks to come. As Rod says, all the required ingredients for revolt and totalitarianism are present. When the economy goes, watch out. The only question is how much time we’ll have between when the U.S. suffers the political collapse to when the economic calamity strikes, and whether most people will piece together what just happened, along with what’s about to happen.

If you need a little optimism in your life, or something close to it, consider what Brazilian prepper Fabin Ommar had to say:

I don’t foresee the First World countries like the United States becoming as dysfunctional as Third-World countries. It would take severe or multiple consecutive shocks quickly to shake institutions and society enough for that to happen in less than a generation.

Others may disagree, and I could be wrong, but I know both realities, the differences and similarities, well enough to affirm that. I’m not saying it’s impossible, just improbable, at least given the actual conditions.

That doesn’t mean things will be fine.

They won’t, and that’s the main takeaway of what I just presented. We should also remember that a fall from grace is more painful when it happens from a high position.

In the end, once the crisis plays itself out, things may end up not being so bad. The problem is, in the interim, it’ll seem like there’s no depth the U.S. couldn’t sink to. It’ll be just as tough to watch as it’ll be to live through it.

Concluding thoughts and advice from Fabian [bold mine]:

And therein lies the silver lining: history shows things never end up as good as we hope, nor turn out as bad as we feared. It all sounds darker in prospect than it is in reality. Call me an optimist if you want, but in my opinion, citizens of the First World will feel the loss more than the actual consequences of it. The majority will adapt and march on; that’s always been the case.

Finally, even though prosperity is on a slump, humankind keeps advancing. Evolution is not linear nor without setbacks or suffering. Actually, we advance through suffering. Still, we’re living the most peaceful and prosperous time ever right now. I find it important to keep that in mind and be grateful for that.

Keep saving, keep preparing, but keep enjoying, too.

Not to downplay what we’re headed towards, but again, I think when it’s all said and done, getting through the long night will be worse than where we actually end up. This isn’t a call for complacency, obviously, but it’s a reminder to keep events in perspective, stick to reality, and remember that though this may be an end, it’s hopefully not the end.

Brace Yourselves

What are your thoughts? Do you find credence in Jeffrey Gundlach’s assessments? Do you share the view the 2028 election, not this year’s will be the real “most important ever?” Why or why not? Will the 2024 election be decided by Congress? What do you think will be the breaking point?

Let’s hear it in the comments section.

Max Remington writes about armed conflict and prepping. Follow him on Twitter at @AgentMax90.

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